1.4 million chips and 5,000 Raspberry Pis power absurdly large mining operation.

In a couple of large buildings near the Columbia River in Eastern Washington, where hydroelectricity is cheap and plentiful, Dave Carlson oversees what he says is one of the largest Bitcoin mining operations on the planet.

At any given time, Carlson's goal is to account for seven to 10 percent of the entire world's Bitcoin mining as measured by processing or hashing power, he said. At the moment, he's slightly below that target but doesn't expect to remain below it for very long. The operations are fueled by thousands of mining rigs containing more than 1.4 million BitFury mining chips, while Raspberry Pis loaded with custom software direct traffic on each rig.

Further Reading

"We were looking for the lowest cost, highest volume production, tiny computer controller that had the ability to integrate with another electronic board design. There are many out there, but the Raspberry Pi is something like 40 bucks," Carlson told Ars.

Carlson's company, MegaBigPower, does the biggest portion of its mining on behalf of its primary investor, the BioInfoBank Institute in Poland. Carlson takes a cut in bitcoins and rents capacity to other people who want to mine without running their own hardware and software.

"We surface about half of our US mining power as something you can purchase as a leased hash product," he said.

Enlarge/ "GH" is one billion hashes per second, and "TH" is one trillion hashes per second.

If you really want to get into Bitcoin mining, it may well be better to run your own hardware than lease hashing power from someone else. Not having any desire to handle the specifics of mining could be a good reason to pay someone else to do all the work. But if Carlson can make money by leasing out mining capabilities and taking a percentage of mined bitcoins, someone who's willing to research the appropriate hardware and configurations themselves should probably just go it alone and reap all the Bitcoin profits.

Nonetheless, MegaBigPower offers a fascinating look at how a small group with money and ambition can account for a disproportionate share of the decentralized Bitcoin network. Carlson's team has fewer than 10 core members, including a CTO, a product manager, and operational, technical, and facilities people.

Carlson mined on his own before starting MegaBigPower, but despite the cut he takes from the current mining operations, none of the hardware is dedicated just to his own Bitcoin wallets. "If I start running my own mining hardware, inevitably I'm going to favor the management of that hardware over the management of my investors' hardware," Carlson said. "It creates a bit of a conflict of interest, so I've stayed away from it."

Still, he said he owns about 5,000 bitcoins (not including about 1,100 on the failed Mt. Gox exchange), worth about $2.9 million at a recent Bitcoin price of $585 per coin. "Other than to diversify some of it away from this high-risk volatile asset, I intend to hold a lot of it long-term. I don't think Bitcoin is done yet," Carlson said.

Carlson said he takes about 10 to 20 percent of all mined bitcoins. "I hold most of my Bitcoin. I give some out to my employees, and I spend very little of it," he said.

Building the business

The first rigs were delivered in July 2013 after about a year of planning, board design, and manufacturing (more technical detail is available here). Carlson's team achieved its first "petahash" of mining power—a thousand trillion or quadrillion hashing calculations per second—in January. It's up to about 2.2 petahash now across two facilities in Washington state and a third in Poland.

This requires a lot of electricity. Carlson said more than three megawatts fuel MegaBigPower's global operations, including Poland. The two buildings in Washington are about 16,000 square feet total, with just about all available space used for mining and power equipment. Carlson said he's "bumping up" against the maximum amount of electricity he can get into his buildings.

A look inside MegaBigPower's Bitcoin mining operation.

Carlson has to keep expanding and upgrading his processing power to remain at seven to 10 percent of the world's Bitcoin mining. Global hashing power is estimated at about 39.5 petahash, putting Carlson's 2.2 petahash at about 5.6 percent of the world's total. Carlson intends to add another petahash within a month, bringing his percentage up to about 8 percent.

Toward that end, he's soon opening a third facility in Washington and rolling out a new rig design. The current rigs each contain 16 boards, with each board containing 16 BitFury chips, for a total of 256 mining chips on each rig. Carlson said about 90,000 processor boards have been deployed, which would put the number of rigs at about 5,600.

A new board MegaBigPower is designing will have 756 chips on each rig instead of 256.

"We are aggressively building out our mining facilities on both sides of the world, and we're shooting for keeping it level, but the reality is that difficulty rises exponentially, and it's hard to build out exponentially at that same rate," he said.

Right now, MegaBigPower can mine 7,000 to 8,000 bitcoins per month, he said. Bitcoin to dollar exchange rates go up and down all the time, but at a price of $585 per bitcoin, that's $4.1 million to $4.7 million. When Bitcoin prices topped $1,000 in January, the monthly yields were worth up to $8 million.

How does mining work, anyway?

Bitcoin mining is the kind of thing that sounds befuddling the first time you hear about it, and perhaps even the 100th time you hear about it. Carlson likens digital coin mining to creating a large transaction clearing house. Imagine that Visa, instead of processing credit card transactions inside its own data centers, outsourced the work to whoever had the proper equipment and used transaction fees to pay rewards to the people who successfully processed those transactions on Visa's behalf.

In addition to transaction fees, mining creates new bitcoins that are awarded to successful miners. Of course, the specifics are more complicated. A Bitcoin.org FAQ explains mining as follows:

Mining is the process of spending computing power to process transactions, secure the network, and keep everyone in the system synchronized together. It can be perceived like the Bitcoin data center except that it has been designed to be fully decentralized with miners operating in all countries and no individual having control over the network. This process is referred to as "mining" as an analogy to gold mining because it is also a temporary mechanism used to issue new bitcoins. Unlike gold mining, however, Bitcoin mining provides a reward in exchange for useful services required to operate a secure payment network. Mining will still be required after the last bitcoin is issued.

Anybody can become a Bitcoin miner by running software with specialized hardware. Mining software listens for transactions broadcast through the peer-to-peer network and performs appropriate tasks to process and confirm these transactions. Bitcoin miners perform this work because they can earn transaction fees paid by users for faster transaction processing and newly created bitcoins issued into existence according to a fixed formula.

For new transactions to be confirmed, they need to be included in a block along with a mathematical proof of work. Such proofs are very hard to generate because there is no way to create them other than by trying billions of calculations per second. This requires miners to perform these calculations before their blocks are accepted by the network and before they are rewarded. As more people start to mine, the difficulty of finding valid blocks is automatically increased by the network to ensure that the average time to find a block remains equal to 10 minutes. As a result, mining is a very competitive business where no individual miner can control what is included in the block chain.

Carlson explained that at any given time, Bitcoin miners are searching for a target value. "It's not much different from all the gold miners in the world digging in the dirt trying to find gold," he said. "All the miners in the world are looking for a value that qualifies as difficult enough to satisfy the current block target."

Wait, if you have loads and loads of money to build powerful bitcoin mining machines, you get to keep the bitcoins you mine? So, you need money to make money, and the rich get richer. Those of us with four-year old laptops are out of the race.

I still don't get bitcoin. I was under the impression it was an egalitarian, socialist idea of a currency that allowed everyone to earn a piece of the bitcoin pie equally. Obviously I was wrong. Very, very wrong.

New bitcoins are created at a fixed rate, and the system is designed to cap the total number of bitcoins at 21 million, an amount expected to be reached in the year 2140. As such, mining gets harder both as targets become more difficult to find and as more machines join the network.

I wonder if all the people originally using CPU,FPGA, and GPUs have all upgraded to ASICS?

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"It's funny, I really wanted to offer credit card purchasing to the community. When I did, I found what exactly is the problem with retailing online now, and it's credit card fraud," he said. "I now see why online retailers are offering deep discounts for Bitcoin purchases, because when you receive Bitcoin you know you're paid and you know it's not fraud. Our cost of supporting credit card transactions has actually caused me to arrive at this point where it may not make sense to support retail sales at our current price point."

The law of unintended consequences. Anyway I wonder if bitcoins will be the future intermediary between the credit card industry and retailers?

Wait, so if you have lots of money to build bitcoin mining machines, you get to keep the bit coins you mine? So, you need money to make money, and the rich get richer.

I still don't get bitcoin. I was under the impression it was an egalitarian, socialist idea of a currency that allowed everyone to earn a piece of the bitcoin pie equally. Obviously I was wrong. Very, very wrong.

It's a anarchist libertarian FUCK YOU GOT MINE idea of currency that will eventually collapse upon itself. As Bitcoin prices rise and the hardware you need to mine bitcoins gets more expensive, you push out the small guys leaving only wealthy individuals trying to get more wealthy. What happens is what you got in Bitcoin and what you are now seeing with Scrypt based cryptocurriences like Litecoin and Dogecoin, a hardware war that only people who are already rich can win. The only other option left if you can't compete through hardware is to compete with scamming, which has proven quite successful in the Bitcoin world when I think something like 17% of all Bitcoins made so far were stolen at one point or another.

Wait, if you have loads and loads of money to build powerful bitcoin mining machines, you get to keep the bitcoins you mine? So, you need money to make money, and the rich get richer. Those of us with four-year old laptops are out of the race.

I still don't get bitcoin. I was under the impression it was an egalitarian, socialist idea of a currency that allowed everyone to earn a piece of the bitcoin pie equally. Obviously I was wrong. Very, very wrong.

It's a pyramid scheme. Eventually, it's going to collapse in on itself and the chaos from that will provide me with endless years of comedy.

I still don't get bitcoin. I was under the impression it was an egalitarian, socialist idea of a currency that allowed everyone to earn a piece of the bitcoin pie equally. Obviously I was wrong. Very, very wrong.

It was never like that, and no alt coin is likely to be like that - even some of the scrypt ones are now successfully being targeted by ASICs, and some of the claimed-CPU-only ones are seeing large portions of their code implemented as something that can be run on a GPU.

Also keep in mind that even if a coin truly were relegated to CPUs like your four-year old laptop, there's always going to be somebody with a 1-year old laptop, or 10 four-year old laptops. The inequality would be less severe, but always present.

Maybe time will prove me wrong, but this strikes me as an investment that will probably never pay for itself.

It already has - sort of. The guy is living quite comfortably. Note also that one of the main investors is that BioInfoBank, who actually helped bankroll the very chip design that he's using (which, by the way, is quite an ingenious design when you string them together as if they were LEDs, taking advantage of being able to use a higher voltage power supply). Their logo is commonly seen on the actual chips as sold to thousands of miners and hardware developers; you can probably imagine that he can get these chips practically at cost, and then 'sell' it right back to BIB - as opposed to most who will have to buy them at market prices, never mind Joe Schmoe who wants to buy a completed miner and has to pay so much that it's difficult if not impossible to break even (most miners banking on the exchange rate of Bitcoin going back 'up, up, up!').

Every time I read about bitcoin mining, I just think of what Warren Buffet had to say about gold mining:

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Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

Immense resources for zero intrinsic utility. And people accept this as valuable? Sigh.

(Yes, I know, printed money also has zero intrinsic utility, but its supply is well-regulated to ensure price stability with no deflation and a modest healthy rate of inflation, and its difficulty of creation is to deter counterfeiting not to serve as an arbitrary means of ad-hoc supply control that invites insane wastes of resources like this.)

I now see why online retailers are offering deep discounts for Bitcoin purchases, because when you receive Bitcoin you know you're paid and you know it's not fraud.

Two things:

Those "deep discounts" are usually only a couple percent. Maybe up to 5%. And hardly anyone is offering them, because 99% of merchants are accepting bitcoins through a processor like coinbase - meaning they aren't accepting bitcoins at all, and they're not offering discounts.

Also - those bitcoins people are paying you with are often stolen. How do you know it's not fraud?

I'm wondering how this guy liquidates the mined bitcoins to fund the operations and purchases of more hardware. I didn't think any of the exchanges were trustworthy or liquid enough to cash him out at that rate.

Bitcoin was supposed to be the great socialist equalizing currency? Are you kidding me, there was never anything noble in the creation of Bitcoin. Bitcoin's origins are grey, and likely have made a few people insanely rich. Not to mention you do not even consider the starving poor without bit miners you forget exist.

Cryptocurrencies are shady, and will also be shady. You want something of value? Horde water.

This is why I like Ripple/XRP. While the currency/network is still much more in its infancy and is riskier than Bitcoin, there isn't a race to expend energy on computing results that don't mean anything. Instead, the "mining" is done via World Community Grid, which currently runs BOINC projects like "Mapping Cancer Markers" and "FightAIDS@Home". (See https://www.computingforgood.org/)

What I find most surprising is how <em>utterly</em> unlike any conventional 'datacenter' gear his setup is (even counting the 'too cool for commodity datacenters' types like Facebook/OpenCompute or Google's custom stuff.)

I realize that bitcoin mining (and brute force attacks on large uncorrelated problem spaces in general) have substantially different networking requirements than more typical loads do, so I wasn't expecting a generic-cluster style switching arrangement; but as best I could tell from the photos there is basically zero overlap between either consumer or enterprise computer parts, except for the fact that the networking between the rPi boards and the head nodes is ethernet.

I've got to admit, it's a bit weird seeing something so...different... from the usual compute setups. Even the scrypt-miners are recognizably using hackjob PC parts, even if their case designs are oddballs.

Every time I read about bitcoin mining, I just think of what Warren Buffet had to say about gold mining:

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Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.

Immense resources for zero intrinsic utility. And people accept this as valuable? Sigh.

(Yes, I know, printed money also has zero intrinsic utility, but its supply is well-regulated to ensure price stability with no deflation and a modest healthy rate of inflation, and its difficulty of creation is to deter counterfeiting not to serve as an arbitrary means of ad-hoc supply control that invites insane wastes of resources like this.)

While that used to be true, i don´t think it is anymore, gold now has value as a material for electronics? And ofc always had value as a material for jewelry etc. I would assume that is how it became the basis for currency in the first place, any civilization that had the manpower to waste on a luxury commodity such as gold (as opposed to using all the workforce for subsistence), must have had a pretty good economy.

That obviously will never be true of bitcoin, there the only "value" is rarity, but on the other hand the supply of bitcoin is much more well-regulated than the supply of printed money.

So, this group of people makes a huge bitcoin mining operation; then later someone else will make an even huger setup, and another, and another... each person trying to be bigger than the last, so that they can get the most bitcoins.

Meanwhile, the bitcoin system itself simply adjusts its artificial difficulty rating and continues running as normal. There is no net gain from having these huge mining operations. They use more and more power, but society doesn't benefit in any way.

I really hope that bitcoin dies at some point, because as long as it lives, it is going to be a continually growing drain on our resources. More and more power is needed to run the mining rigs, just to complete with other mining rigs. The costs grow, but the gains do not - so society as a whole is made worse off.

I bet they have a pineapple express style grow operation hidden in there somewhere. Using an insane amount of electricity on bitcoins would be the perfect way to mask the real purpose of the electricity being used.

Oh well, the USD is backed by the US Army which make me wonder who is backing the BTC? after all this world is filled by currencies but few if not just one is the most important, being there first can secure its domination? after all every organization or nation can roll their own . but still gold is finite and fiat money is not. the economy we live in can't be sustained by gold it needs fiat from thin air. instead of building a cluster dedicated to solve protein folding and solve real problems, people use up resources and talent to "catch the dragon" like randy marsh.

Meanwhile, the bitcoin system itself simply adjusts its artificial difficulty rating and continues running as normal. There is no net gain from having these huge mining operations. They use more and more power, but society doesn't benefit in any way.

The net gain is not "society's" to decide. It is the individual's free choice or not and what that individual values as a gain for himself. Society really doesn't have anything to do with it, and society has no right to impose its version of "net gain" where there are no crimes committed between people. If someone wants to build a mining rig bigger than the previous guy, you and the government have nothing to say about it. The individual doing the mining bought the power, so it is theirs to use as they see fit (barring criminal activity of course).

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I really hope that bitcoin dies at some point, because as long as it lives, it is going to be a continually growing drain on our resources. More and more power is needed to run the mining rigs, just to complete with other mining rigs. The costs grow, but the gains do not - so society as a whole is made worse off.

I reject your premise. It is not "our resources". It is the power company's resources and later the customer's resources after they have bought the power from the power company.

I have not suggested that there be laws again bitcoins or anything like that. I fully understand that some individuals might benefit from this blatant waste of resources, and that's what motivates them to do it. I'm just saying that it is bad for humanity as a whole.

Let me restate my point in another way: The world does not have an infinite amount of resources available. Humans have no choice but to share the finite resources we have available. They aren't necessarily shared evenly or fairly, but the resources certainly must be shared - because they are finite. An individual person, or group of people, might profit from spending a lot of resources on mining bitcoins, but in terms of the net wealth of all of humanity, we're worse off. It costs resource to increase the total hash rate of the bitcoin network, but it doesn't produce any net gain for the world, because the bitcoin system is designed to produce the same results regardless of what the total hash rate is.

This is true regardless of who owns the power, or who owns the bitcoins, or whether it is within someone's legal rights to mine bitcoins.

Meanwhile, the bitcoin system itself simply adjusts its artificial difficulty rating and continues running as normal. There is no net gain from having these huge mining operations. They use more and more power, but society doesn't benefit in any way.

The net gain is not "society's" to decide. It is the individual's free choice or not and what that individual values as a gain for himself. Society really doesn't have anything to do with it, and society has no right to impose its version of "net gain" where there are no crimes committed between people. If someone wants to build a mining rig bigger than the previous guy, you and the government have nothing to say about it. The individual doing the mining bought the power, so it is theirs to use as they see fit (barring criminal activity of course).

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I really hope that bitcoin dies at some point, because as long as it lives, it is going to be a continually growing drain on our resources. More and more power is needed to run the mining rigs, just to complete with other mining rigs. The costs grow, but the gains do not - so society as a whole is made worse off.

I reject your premise. It is not "our resources". It is the power company's resources and later the customer's resources after they have bought the power from the power company.

You have a very valid point good sir, you have earned an upvote.

Unfortunately, I disagree with your point. While true that it is theres to do with as they wish, it is also everyone elses right to look down on their flagrant waste of resources. Even though this outfit may be in a location with an over abundance of cheap electricity, there are many people who live in places where it is not cheap and they sometimes have to deal with rolling brown and blackouts. To a lot of people, it amounts to something akin to buying food stuffs by the ton and then just letting it spoil. Because, well fuckit, its yours. It may be yours, but when you waste a pooled and limited resource that everyone relies on, it upsets a lot of people.

Also the fact that it could have been designed to do something actually useful, like folding@home and such, and used completed chunks as tender or something, but was instead just used to find the lowest hash for no reason other than to say you did, pisses a lot of people off too.

Every time I read about bitcoin mining, I just think of what Warren Buffet had to say about gold mining:

"Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

Immense resources for zero intrinsic utility. And people accept this as valuable? Sigh.

The value of something is what people are willing to pay for it. Hypothetically if someone is willing to pay $1000 for a bitcoin, or an ounce of gold or a beanie baby, then that is what that piece of property (or commodity) is worth.

What people are willing to pay (or the value of something) does not need (on the surface at least) to make logical sense. And there is a long history to this.

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in March 1637, some single tulip bulbs sold for more than 10 times the annual income of a skilled craftsman. It is generally considered the first recorded speculative bubble (or economic bubble)

With gold there is a longterm value to this metal with the making of jewelry and as a part of electronic components. So, there is a constant demand for gold and therefore it continues to remain valuable. - We will see how much of Bitcoin's value will be left in the next 10-20 years.

Unfortunately, I disagree with your point. While true that it is theres to do with as they wish, it is also everyone elses right to look down on their flagrant waste of resources. Even though this outfit may be in a location with an over abundance of cheap electricity, there are many people who live in places where it is not cheap and they sometimes have to deal with rolling brown and blackouts. To a lot of people, it amounts to something akin to buying food stuffs by the ton and then just letting it spoil. Because, well fuckit, its yours. It may be yours, but when you waste a pooled and limited resource that everyone relies on, it upsets a lot of people.

Also the fact that it could have been designed to do something actually useful, like folding@home and such, and used completed chunks as tender or something, but was instead just used to find the lowest hash for no reason other than to say you did, pisses a lot of people off too.

It's fine to have an opinion. But, it changes once people turn their opinions into deciding how to point government guns, because now it becomes that one person's opinion can result in another person's financial ruin, imprisonment, or death.

And the abundant electricity in one place isn't necessarily available to the other place. The Hoover Dam generators can't supply electricity to Somalia no matter how much people might want to do it. So, whether anyone wastes Hoover Dam electricity, it has no bearing on Somalia. If local demand for Hoover Dam electricity went to zero, it would not benefit Somalia one bit.

Also, the availability of food is not generally limited by supply but in the corruption and tyranny of the destination countries. Oh, and also the insistence of using corn and such as a fuel rather than just leaving it as food and finding other non-food fuels.

The usefulness of BitCoin is advertised as a currency free from political manipulation.

As to my personal opinion of BitCoin, as someone who has libertarian sympathies (I technically consider myself classic liberal), I tend to believe it's not even as libertarian as its supporters might wish it to be. In essence, there is a "central authority" in the master block chain. Sure, the block chain is stored and calculated in a distributed fashion, but there is still only one valid block chain. And it's validity is based on essentially a 51% vote, which starts to bring in the trappings of a government. So, the BitCoin validity is based on a master record, which is based on 51% of people agreeing to it. I'm not sure that is as separated from "government" as its supporters want it to be.

So, this group of people makes a huge bitcoin mining operation; then later someone else will make an even huger setup, and another, and another... each person trying to be bigger than the last, so that they can get the most bitcoins.

Meanwhile, the bitcoin system itself simply adjusts its artificial difficulty rating and continues running as normal. There is no net gain from having these huge mining operations. They use more and more power, but society doesn't benefit in any way.

I'll leave your stance on the benefit to society to the other comments - I think it can be argued any which way, though I'll certainly agree that I - personally - much prefer the altcoins that in their useful work not only help secure the network (be that a 'currency' or something else) but also help, say, medical research.

( One very minor note on 'waste of resources', the miners are actually getting more and more efficient* to the point where they can conceivably be run off of e.g. solar power. That solar power could also be used to power other things, of course.The TerraMiner IV for example does 2Thash/s at 2.2kW. If you look at one of the best GPU mining cards, the Radeon HD7970, you're looking at about 700Mhash/s at let's say 500W (both numbers are pretty fuzzy). Put a different way, a single TerraMiner IV can replace about 650 Radeon HD7970 cards. Note that this is just the cards - you still have to have actual computers that these plug into which increases wattage further. The new version of the BitFury chip is also more efficient, and other companies are working on other designs that are virtual leaps beyond. )

To the miners, however, there's a bit of a potential 'end game'.Bitcoin mining is become more and more centralized, there's just no denying that. You can buy a few miners yourself, but you'll still have to join a pool, and that pool is still - statistically - no match for huge operations like the one in this article simply because while the hashing power gets combined, the payouts are scattered and people really don't like getting their stuff together in an organized fashion. These huge mining operations basically end up having two paths they can go down as long as they continue to grow... A. Bitcoin fails, in that nobody really wants to use it anymore, and their hardware needs to be written off. That means they have to make as much profit as they can now, because they know that it's going to be a lot harder in the future.B. Bitcoin is a success, in that there will be enough use of it that they can generate enough income out of transaction fees. Transaction fees are the desired 'end game'. If you and a handful of other GigaLargeMining companies hold most of the hashing power, you can help set the transaction fee height. Sure, somebody could enter a transaction that has a lower fee.. but then they'll just let some poor miner with a mere fraction of the hashing power handle that one.. and it would take approximately forever for the transaction to get processed, so you best set the minimum transaction fee that is effectively imposed by these hashing companies.